Dan Loeb, CEO of Sony Corporation's "largest owner" Third Point LLC, called for the company to sell as much as 20 percent of the Sony Entertainment division to increase performance in a letter today written to Sony president and CEO Kazuo Hirai.
Third Point LLC and the entities that it manages holds $1.1 billion in Sony stock, about 64 million shares. The hedge fund provides pooled investment services worldwide, and its proposal would have Sony offer 15-20 percent of Sony Entertainment to current shareholders as a means to incentive performance and increase profit margins.
"Sony Electronics has suffered frustrating results for the past decade, brought about by low margins, persistent losses, and weak returns on capital," Loeb wrote. "While it is true that Sony has excellent products, such as the PlayStation, Xperia smartphones, and mirror-less cameras, several of Sony's product lines — e.g., personal computers and DVD recorders — lack scale and provide commoditized products at high costs to secularly challenged markets."
In doing so, Loeb believes that Sony would be able to "reward management" based on divisional performance.
In a statement provided to USA Today, a representative for Sony rejected the offer.
"As President and CEO Kazuo Hirai has said repeatedly, the entertainment businesses are important contributors to Sony's growth and are not for sale," the statement reads. "We look forward to continuing constructive dialogue with our shareholders as we pursue our strategy."
After five years of losses, Sony reported net profit for the fiscal year ending in March 2013 last week. Late last month, Sony doubled its projected earnings forecast. Recent sales of company assets, including its North American headquarters in New York City and its "Sony City Osaki" Tokyo property, contributed to its earnings forecast.
Sony also announced recently that its upcoming next-gen console, the PlayStation 4, will not cause major fiscal losses, unlike the PlayStation 3.